How The iWatch Could Be Apple's Secret Weapon For Mobile Payments (AAPL)

Monday

Jul 28, 2014 at 11:55 AM

Lisa Eadicicco

Apple's first wearable may be different than other smartwatches and fitness trackers.

While gadgets such as the Pebble, Jawbone, the Samsung Gear 2 and others are all about notifications and health tracking, Apple's iWatch may also target a less sought after area of focus for wearables— mobile payments.

Back in June, noted tech columnist Tim Bajarin proposed an interesting theory about Apple's plan for the iWatch. He likened Apple's plans to the approach Disney has taken with its "Magic Bands," which act as a one-stop shop for purchasing food and souvenirs in its theme parks and gaining access to certain rides.

Simply tap your band, enter a PIN code, and leave your wallet at home. The same system also replaces your hotel room key — just tap your band to the door to access your room.

Within the past few weeks we've been hearing a lot about Near Field Communication (NFC) technology coming to the iPhone and iWatch. This combined with reports that Apple is building its own mobile payments service make Bajarin's theory seem like an even more plausible plan for the iWatch.

But while the "tap-to-pay" sort of functionality described in Bajarin's post would require technology like NFC, what could make the iWatch a real killer in the mobile payments space is its role as a means of authentication.

"There's a distinct possibility that Apple's iWatch would not just be about health tracking, and may be focused on identify and access," Avi Greengart, research director for consumer platforms and devices at Current Analysis, told Business Insider.

In a hypothetical scenario, the iWatch could be aware of your identity either through the use of a fingerprint scanner or by requiring you to authenticate yourself through your iPhone when you set up the watch, Greengart said.

"That opens up all kinds of possibilities, such as that it could be tied to your iTunes account," Greengart said. "Apple has resisted putting NFC in its phones, perhaps because it thinks it belongs on the wrist."

Although it's unclear exactly how the iWatch could fit into Apple's plans for mobile payments, more evidence is suggesting that the company plans to launch its own platform soon.

In fact, Apple could launch its own mobile payments service for the iPhone as early as this fall, Amir Efrati at The Information reports. Apple is believed to have already discussed these plans with some of its partners, which include Visa, the report says. Prior to The Information's report, 9to5Mac's well-connected Apple blogger Mark Gurman also reported that Apple is creating a mobile payments platform specifically for purchasing luxury goods.

Apple has already laid the groundwork for a reliable and secure mobile payments system with the iPhone 5s' TouchID fingerprint sensor. Now that Apple is giving developers access to TouchID's back end, there's opportunity for e-commerce apps to integrate with Apple's fingerprint sensor.

For example, Samsung has already partnered with PayPal to allows Galaxy S5 owners to pay for items by simply authenticating with a fingerprint rather than a password. It wouldn't be surprising to see Apple do the same if it is indeed building its own mobile payments platform.

This combined with the massive amount of credit cards Apple has on tap through its iTunes user base would certainly work to its advantage in the mobile payments space.

But when it comes to the iWatch, Apple will have to offer a more compelling selling point in addition to convenient tap-and-go payments.

"Apple will need to solve this problem of 'why am I buying this device?'" Greengart said. "If the reason I’m buying it is just to have slightly faster payments in some locations, that's going to be a very poor reason to buy."

The iWatch is expected to debut later this year in either October or November. Other than mobile payments, Apple's wearable could heavily focus on health tracking and fitness. All-star athletes such as Kobe Bryant are said to have tested the device, as 9to5Mac also previously reported.

See Also:

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